The role small businesses play in the economy of countries are very germane. They enhance the growth and development of nations through massive job creation, contribution to the Gross Domestic Product (GDP) and consequently reducing poverty and crime rates. Despite their importance, small businesses all over the world especially developing countries face diverse challenges that affect their performance. The objective of this study is to investigate the environmental factors that impact the financial and non-financial performance of small businesses. A survey method was used to gather data from two hundred and four small business owners and managers located in selected cities in Nigeria. Descriptive statistics and correlation analysis were conducted to identify the relationship between internal and external environmental factors and the performance of small businesses in Nigeria. The results of the study reveal that inadequate finance, inadequate infrastructure and poor managerial skills have significant and negative relationship with small businesses’ performance. Meanwhile, inadequate finance is the most significant factor while, inadequate infrastructure is the least significant factor.
This study emphasizes the need for favourable government policies to support small scale businesses in easy access to finance and training. Small business owners are advised to regularly attend workshops, training and seminars for skills update. Government is also implored to fix dilapidated infrastructure in the country. In the case of this study revealed, inadequate infrastructure least affects MSEs performance. This appears to be the availability of substitutes for many infrastructural deficits. For example, there is no stable electricity in Nigeria, but most MSEs can afford at least a small generator popularly called “I pass my neighbour” to power their businesses. Also it is scarce to get pipe borne water, but many alternative exists e.g. bottled water, sachet water, buying water in large quantity from private borehole water suppliers or fetching from wells.
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